As residential property taxes rise, Fairfax County’s commercial base shrinks

While many Fairfax County homeowners are bracing for jumps in their real estate tax assessments, the overall property tax burden on commercial and industrial property owners is projected to drop.

With the market upended by the pandemic, telecommuting, and other factors, the county’s property tax revenue for commercial and industrial properties will decrease by $8 million for fiscal year 2023, which starts July 1.

Meanwhile, the residential property tax base will increase by $155 million after a surge in housing demand fueled rising assessments. Bills are expected to increase even with the Board of Supervisors planning to reduce the tax rate when it adopts a new budget on Tuesday (May 10).

Real estate taxes are the primary funding source for county services, including schools, fire, police, social services, libraries and parks.

The residential property tax base is projected to bring in $2.2 billion for the current fiscal year 2022, which concludes on June 30. With 240 new parcels and the tax rate change in the coming fiscal year, the properties will produce a 6.9% increase in revenue.

Commercial and industrial taxes should generate nearly $550 million for fiscal year 2022, but the base only added two more parcels, resulting in a 1.5% reduction in anticipated revenue.

“Commercial assessments were down almost across the board last year (FY 22) because of the pandemic,” a county spokesperson said in an email. “Some property types dropped in value more than others. For this year (FY23), the effects of the pandemic have started to subside, and commercial property values have, by and large, started to recover. As with the previous year’s assessments, not every commercial property type is recovering at the same rate.”

Offices and other commercial properties are assessed based on the income they produce for the property owner, according to the county. The value of some commercial property types — such as gas stations, fast food restaurants, and commercial condominium units — is determined “using a sales comparison approach,” the county says.

Delinquent taxes weren’t included in figures the county provided, and Public Service Corporations assessments, such as utility taxes, were excluded because they are assessed separately by the state.

County staff said that while the ratio changes from year to year, residential properties typically make up approximately 75% of the tax base.